How Finance Professionals Can Keep Data Protected All Year Long

Although finance is often referred to as a profession where “everything is about numbers”, the success of tax and accounting professionals actually depends on the relationships they build with clients or colleagues. Relationships built on trust and mutual respect can ensure ease of collaboration, productivity and success for years to come.

So how does a financial professional start building these effective relationships? A 2021 PwC survey on U.S. business confidence shows that 62% of consumers believe that “data protection and cybersecurity” are an important component of trust. In other words, most people cannot trust professionals or organizations that compromise their confidential data. In fact, four out of five customers decide with whom to do business based on the company’s reputation in data protection. And the brand will change after the same bad experience.

Despite this investigation, financial institutions are struggling with data security, a problem that worsened during the Covid-19 pandemic. The 2021 Shred-it data protection report shows that 52% of financial institutions have faced data burglary, up 21% from the previous year. And while most financial services companies are aware of the low risks of data security, only 43% of them regularly check their infrastructure. Even fewer (38%) regularly look for vulnerabilities. By not taking appropriate measures to prevent data burglary, financial institutions and professionals risk not only their own litigation but also their trust in their customers and colleagues.

Taxes and finances often have access to the most confidential information, including the social security numbers of their clients, financial history, birth certificates (for new parents) and credit card information. To keep this information safe throughout the year and maintain a strong relationship with your customers, tax experts must follow these five steps:

1. Ensure secure storage of information throughout the tax preparation process

Financial records and documents are a minefield of personal information. Professionals should keep paper documents, receipts, credit card information and confidential forms in a closed box, including forms that include your Social Security number or federal tax identification number if not required. If files are stored electronically, they should be stored on a secure computer (or network) with cybersecurity measures such as logical access control, encryption, and monitoring / warning.

In addition, when taxpayers collect financial information from their customers electronically, they should avoid it by email, which is not a secure method of data transfer due to difficulties in controlling distribution. Instead, tax experts should provide a secure portal where customers can upload documents, giving them more control over access and easy access to files after they do their job. Where possible, financial institutions should also implement two-factor authentication , as revealed in Microsoft’s 2019 report, to significantly reduce the likelihood of data hacking.

Tax and financial firms should also have clear office policies - secure storage of confidential paper and electronic information when employees leave their jobs - to prevent the misuse of confidential information. Clean office policies are important not only in office buildings, but also in remote work facilities, where family members or guests may have documents that contain confidential information or are incorrectly ignored.

2. Beware of tax fraud and other threats

The IRS continues to consider fraudulent schemes where unscrupulous individuals prey on individuals and companies to share sensitive financial information or engage in illegal activities. Tax evasion is so common that the IRS has compiled an annual list of “ dirty tens ” to be read to the public.

Fraudsters and other bad entities may try to target the tax authorities to gain access to their confidential information. Similarly, cyber attacks on large and small businesses are growing. Only in 2021 did hacker groups gain access to the systems and confidential information of major corporations, including T-Mobile , Colonial Pipeline , JBS and others. Many of these hacks started with a simple phishing email or cracked password. Companies that train employees to recognize fraudulent emails and other common hacking techniques can better prevent data hacking and protect sensitive information.

3. Decide what to keep when filing taxes

Financial professionals do not have to constantly store tax information of their clients. In fact, storing unnecessary documents can increase vulnerabilities and risks. To save physical and digital space and reduce the likelihood of data hacking, tax professionals need to understand which documents need to be stored and which to dispose of.

Once a person has filed a tax return, the IRS recommends keeping any “evidence” confirming income or deduction and credit in the tax return, a copy of the previous year’s tax return and necessary records such as birth and death certificates, citizenship documents and marriage records. license

On the other hand, the IRS recommends disposing of documents that serve no other purpose during the tax season or any other period, including sales receipts, payment slips, payday loan documents, and any documents that have been digitized. If the document does not particularly affect a person's tax situation or it is necessary for future tax filing, it can and should be safely disposed of.

4. Properly dispose of old tax and other unnecessary documents

Preventing data breaches does not end with deciding which documents to get rid of; It is also important to safely get rid of these unnecessary documents. Throwing away paper documents, including sensitive information in the trash or reusable ones, can increase the risk that someone will steal the information and use it to steal personal information or for other illegal purposes.

One of the best ways to safely get rid of paper documents is to shred them, shred, shred, slice, shred and shred. to cut

5. Contact procedure

Clear communication and transparency are important components of a strong and mutually beneficial relationship between tax and financial professionals and their clients. It may be helpful to discuss the security policy when meeting with customers or to set it out in an email. By effectively communicating these efforts, financial professionals and organizations demonstrate that they prefer to protect the personal data of their clients and lay the foundation for a reliable and effective relationship.

The risk of data hacking is greater than ever, especially for tax and financial purposes. Following these steps to protect sensitive data is not only more effective and cost-effective than combating the effects of data hacking, but can also protect the trust between financial professionals and their customers.

This article does not necessarily reflect the views of the publishers or owners of The Bureau of National Affairs, Inc. and Bloomberg Law and Bloomberg Tax.

Information about the author

Michael Baramea is vice president of data protection for stereo courses. He has over 23 years of extensive and diverse experience in privacy and cybersecurity.

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